Bernanke spotlighted the Fed's efforts: urging mortgage servicers to be more flexible in modifying unaffordable mortgages, partnering with neighborhood and community groups to provide counseling to borrowers and reducing interest rates to provide liquidity and free up mortgage and credit markets.

The Bush administration has proposed modifications to the FHA loan program so borrowers with adjustable loans that reset to higher interest rates can refinance into more affordable fixed-rate loans. It's also putting tax breaks on the table for borrowers who are forgiven mortgage debt.

But, according to John Taylor, chief executive of the National Community Reinvestment Coalition (NCRC), some of the initiatives discussed on The Hill Thursday will have some positive impact, but they don't go nearly far enough.

"You have people talking about the FHA program and saying it will help 80,000 people. That's a drop in the bucket," he said. "Even industry sources [such as Moody's Economy.com] say there will be 1.7 million people losing their homes."

"We have passed the point where piecemeal solutions can work; significant measures are necessary to give working families a reasonable chance to stay in their homes."

Taylor criticized government efforts in an area in which his organization specializes: advising troubled borrowers. "We have to recognize that not everyone can be counseled out of debt. For some, we need to reduce the actual debt obligation," he said.

Another fix on the table from Paulson was temporarily raising the limits on the size of loans that Fannie Mae and Freddie Mac may buy. Both the government sponsored enterprises currently guarantee the purchase and trade of mortgages that don't exceed $417,000 and meet certain underwriting criteria.

Many lawmakers have been calling for an increase in those loan limits so that the agencies can inject more liquidity in the credit-squeezed mortgage market, which seized up as a result of the subprime crisis.

According to Sam Rogers, mortgage industry analyst for the Center for Responsible Lending, raising the limits might "help some people get out of the more toxic loans."

But what he said he'd really like to see is servicers streamlining their loan modification programs and making them more uniform and consumer friendly.

"We should make sure servicers have every incentive to get people into modification programs," he said. As it is, they're done on a case-by-case basis. No one can really know how much their servicer is willing or able to rework their loans, which discourages many borrowers from even trying. Paulson noted that about 50 percent of owners who lose their homes to foreclosure never do talk to their lenders.

Bruce Marks, chief executive of Neighborhood Assistance Corporation of America, was one of the only representatives of consumer groups to appear before the committee. He called for a borrower-focused solution based on what the borrower can afford as the only viable remedy. Lenders would have to reduce interest rates to what homeowners could pay.

"The regulators must exercise their power to require lenders to restructure their loans," he told the House committee. "This remedy addresses the interests of all parties involved: the investor can obtain a reasonable return, homeowners can keep their homes, and the local tax base can be maintained," he said.

"We need to step in and say this is a too-big-to-fail situation," said Taylor.